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What is the Medicare Fee Schedule and How Does It Work?

Just as with any other type of insurance, it is important for Medicare to know how much to reimburse providers and other health care professionals for their services – without paying out too much. This is why Medicare has developed a fee schedule.

A fee schedule is essentially a complete list of fees that is used by Medicare for the purpose of paying doctors, as well as other types of health care suppliers and / or providers for the services that they have offered to Medicare enrollees.

Medicare will pay a hospitals and other related providers a set fee or payment amount that is based upon an enrollee’s diagnosis. For example, for doctors, laboratory, and other related types of services, Medicare will pay out based upon the actual service and supplies that have been provided at the amount that has been set in the Medicare Fee Schedule.

How Does the Medicare Fee Schedule Work?

The Medicare fee schedule is very extensive, as it sets a pay payment limit amount for literally each and every service or item that a Medicare enrollee may receive. In doing so, the fee schedule uses a set of codes.

These codes that are set in the Healthcare Common Procedure Coding System, or HCPCS, actually describe each of the related services or items and then relate it to a payment limit. It is these codes that physicians and other providers use when filling out claim forms in order to receive payment for their services.

In addition to just codes for physicians’ services, Medicare also sets payment limits for other health care related services such as:

Clinical laboratory tests

Durable medical equipment

Ambulance services

Prosthetics

Orthotics

These payment limits are available in separate fee schedules.

How Are the Payment Limits Set?

When setting the amount for the payment limit, Medicare takes into account a number of different factors. These primarily include the amount of work that the doctor or other provider needs to perform, as well as the actual expense to the medical practice for performing the service.

In addition, Medicare also takes into account the potential local and regional differences in costs for things such as office space for physicians, as well as the cost of office supplies, and the cost for employees’ salaries.

Given all of these factors, Medicare will then apply a local adjustment factor into the overall equation when setting cost limits which may either increase or decrease the Medicare payment based upon a provider’s specific geographic location.

Every year, Medicare will also update the fee schedule. When going through the fee schedule update, various factors will be taken into consideration, such as requests and comments from the public.

After going over all of the data, Medicare will then publish its finalized fee schedule. The updated draft is typically available in the summer, with the finalized fee schedule being published prior to the end of the year.

How to Determine the Fee Schedule Based on Locality

In order to determine a Medicare fee reimbursement amount based upon a certain location, you would need to gather information about the type of service that is being provided, as well as the type of provider that is offering the service. In addition, the provider’s zip code would also be necessary.

Typically, you can provide this information to Medicare either online or via telephone, and they can offer you information about the reimbursement rate. Knowing this can help you in determining how much you may need to pay out-of-pocket for an upcoming surgery or other procedure. If this is the case, it is also important to keep in mind any potential deductibles, co-payments, or coinsurance that may also be required.

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